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AZERBAIJAN


  
  

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 7,124 6,090 5,600 102
         
GNI per capita
 US $ 810 710 650 146
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 315- (29/03/07)

The ever-present problem
There is a huge problem for Azerbaijan, its unresolved conflict with Armenia over the Nagorno-Karabakh territory. One and a half million Azeris are refugees as a result. Both nations are in thrall to this trauma. It will need statesmanship of the highest order to resolve it.

Alas, there is small sign of this on either side as yet. Ilham Aliyev, president of Azerbaijan, is a playboy turned politician, but no statesman he. Azerbaijan is the most corrupt of countries and in this he is truly representative of his domain. 

His counterpart, Robert Kocharian, president of Armenia, is due to depart next year. As a hardliner on the issue, a former president of the enclave no less, this need not be regretted. But it is unlikely he will have a more enlightened successor. 

The status quo rather suits the hardliners on both sides. It is effectively a stalemate, from which many benefit. 

The oil curse compounds it
It is a curiosity that countries with the apparent advantage of oil wealth tend to expend it in destructive ways, while allowing their traditional economy to be hollowed out in the process. Azerbaijan is enormously endowed with oil, some 31 billion barrels at a conservative estimate. Aliyev intends to use the proceeds to build up a colossal army and rewrite the war.

Armenia lacks energy resources; but it has a crucial ally that does not - Russia. The Russian military are gung-ho about using the Armenians to intervene in the Caucasus. The tedious truth is that everybody seems obsessed about oil - the exploitation of which is deadly to the human race, so the scientists assure us. But they are also obsessed about power, from which all else flows.

Azerbaijan pursues NATO integration
It is hardly surprising that Azerbaijan is pressing ahead with plans to overhaul the country's armed forces in order to bring them up to North Atlantic Treaty Organization (NATO) standards. It has a strong moral and legal case over the dispute with Armenia - and it is becoming a most important conduit for Central Asian energy exports, as well as a provider of the same in its own right. Baku is back to being a vital hub of the world energy industry, as it was before 1914.

The pace of reforms will be gradual, according to senior government officials. 

The deputy speaker of the Azerbaijani parliament, Ziafarat Asgarov, indicated that the legislature would adopt a new strategic doctrine by mid-2007, the Ayna newspaper has reported. A draft of the doctrine is on the agenda for parliament's spring session. 

In the meantime, bucking a trend of disengagement, Baku has agreed to increase the number of Azerbaijani troops serving with NATO in Afghanistan, according to Robert Simmons, the special representative of the NATO Secretary General for the South Caucasus and Central Asia. As of 2005, Azerbaijan had 22 troops in Afghanistan, according to the NATO figures. 

Azerbaijani President Ilham Aliyev has named NATO integration as a top foreign policy priority for Azerbaijan. The country's participation in the alliance's Individual Partnership Action Plan (IPAP), a set of requirements that must be met by alliance candidate-members, is scheduled to end in 2007. Azerbaijani officials, who have already started work on plans for the next two-year slot of Azerbaijan's IPAP, have indicated that they want to continue with the programme. 

A second IPAP, running from 2007-2009, is expected to be signed with Azerbaijan soon, said Simmons, who held 15th March consultations in Baku with Azerbaijani Defence Minister Colonel General Safar Abiyev. Azerbaijan began its IPAP program in 2005. An evaluation of the program's initial two years was made in February. Simmons expressed satisfaction with Azerbaijan's military reform process. "Azerbaijan is our reliable partner. The cooperation between Azerbaijan is successfully developing," the APA news agency quoted Simmons as saying. 

Turkey, a NATO member with strong cultural ties to Azerbaijan, is ready to act as an expediter of Baku's reform process. A high-level military commission is expected to be set up to coordinate bilateral military cooperation, the Anatolia news agency reported 1 March. Particular emphasis will be put on training, an area that General Ergin Saygun, deputy chief of the Turkish General Staff, has described as the most important part of the cooperation between the two states. Turkey also plans to help Azerbaijan establish an army company that meets NATO standards, the general said during a trip to Azerbaijan in late February. 

Several Turkish generals are planning to travel to Azerbaijan in late April on an inspection tour, after which they will make initial recommendations on Azerbaijani structural reforms, the News of Azerbaijan news agency quoted Selami Chinbat, the Turkish embassy's military attaché in Baku, as saying. 

An independent military expert, Ismet Abbasova, expressed hope that the Aliyev administration's desire to develop closer ties with NATO could stimulate broad reforms in Azerbaijan. "I hope there will be development in the education system because the lack of skilled military staff indicates that the Azerbaijani army is not up to modern standards," she said. 

If all goes according to the Azerbaijani government's plan, the country's armed forces would meet NATO standards by 2015. The changeover, however, will not come easily, cautioned Zahid Oruj, a pro-administration MP who holds an influential position on the legislature's Defence and Security Committee. "Taking into account that military reforms are more complicated than economic and political [reforms], and many officers have a Soviet education, it will take time," he noted. 

The "frozen conflict" with Armenia over the disputed breakaway region of Nagorno-Karabakh could also hamper plans to create a purely professional army, commented Lieutenant General Vahid Aliyev, a military aide to President Aliyev. "Since Azerbaijan is at war right now, it would not be right to transform the entire army into a professional one," Lieutenant General Aliyev told the APA news agency in late 2006. 

Oruj said the government is currently "seriously" working on plans to promote civilian leadership of the Defence Ministry. At the same time, he downplayed media speculation that a civilian would be named as defense minister anytime soon. "We did not undertake a commitment on this because the war between Armenia and Azerbaijan has not ended yet," he said. A Defence Ministry spokesperson said that he has no information about which ministry posts might be assigned to civilians. 

Despite probable delays in establishing a professional, civilian-administered military, Oruj affirms that Baku's commitment to NATO stands firm. "We do all this work because our national interests demand it, and it is our own choice to transition to NATO standards." 

Other top government officials are more cautious. During a February interview with the German television channel Deutsche Welle, President Aliyev hinted that Azerbaijani eventual membership in NATO should not be considered a foregone conclusion. "What will be the result of this partnership, time alone will show," the Azerbaijani president said. 

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AVIATION

Azerbaijan Airlines signs order for Boeing 787s and 737s


Azerbaijan Airlines has signed an order for three Boeing 787-8 Dreamliners and two Next-Generation 737-900ERs (Extended Range), New Europe reported. 
Azerbaijan Airlines, based in Baku, is the first airline throughout the republics of the former Soviet Union to order the 787 and the 737-900ER. The order is valued at US$609 million at list prices. Jahangir Askerov, director general of Azerbaijan Airlines said, "This order is a momentous step in our history. With the twin-aisle 787, we will enter the long-haul market for the first time. By expanding our fleet with long-haul twin-aisle airplanes, we will offer our customers many more choices for far-away destinations. We are eager to enter this new chapter in our proud history."

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CREDIT RATINGS

Fitch upgrades Azerbaijan to BB+

Fitch Ratings has upgraded the Republic of Azerbaijan's foreign and local currency Issuer Default ratings (IDRs) to BB+ from BB, the ratings agency said in a press release, New Europe reported.
The Outlooks remain Stable. The Country Ceiling has been revised to BB+ from BB while the Short-term foreign currency rating is affirmed at B, the release read. 
"Fitch's upgrade of Azerbaijan's sovereign ratings is driven by strong and sustainable economic growth, low government and external debt ratios and a growing current account surplus, underpinned by rapidly rising oil and gas production," said David Heslam, a director in Fitch's Sovereign group in London. The completion of key energy export projects in 2005 and 2006 has driven a significant rise in hydrocarbons production, accelerating Azerbaijan's real GDP growth, which reached an estimated 35 per cent in 2006. Rapidly growing oil exports led to an end-year current account surplus of 14 per cent of GDP. At just 11 per cent of GDP, Azerbaijan's government debt-to-GDP ratio is the lowest of all BB range sovereigns and Fitch estimates that the public sector's net external creditor position is equivalent to nine percent of GDP. 
Azerbaijan's external debt stock is the second smallest in the BB range at just 20 per cent of GDP.

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ENERGY

SOCAR signs direct contract with Thailand

Azeri state oil company SOCAR signed a contract for direct supplies of Azerbaijani oil to Thailand, a source in the company's marketing department said, Interfax News Agency reported.
"The contract was signed with the Thai company PTT Public Company Limited on February 28th 2007 for one year, and calls for the export to Thailand of up to 1 million barrels of Azeri Light per month from the Ceyhan terminal on FOB and CFR conditions. 
This oil is to be supplied to the company's refineries in Thailand. This is the first long-term agreement signed by SOCAR and an oil refining company," the source said. PTT Public Company Limited is involved in production, refining and transportation of oil and gas, and also in oil and oil product import-export operations. The company has stakes in four refineries in Thailand. Azeri Light is produced as part of the Azeri-Chirag-Gunashli project, in which SOCAR has a 10 per cent stake. Profitable oil is distributed between the shareholders in the project in proportion to their participation in the contract.

Kazakstan assessing Trans-Caspian gas pipeline

The Kazak authorities are continuing to assess the feasibility of building a gas pipeline under the Caspian Sea that will link Tengiz in Kazakstan, Turkmenbashi in Turkmenistan, and Baku, Interfax News Agency reported.
Kazakstan's position is that the project cannot be put into effect without the consent of all five Caspian littoral nations, Kazak Energy and Mineral Resources Minister, Baktykozha Izmukhambetov, told Interfax in Astana on February 28th.
"During numerous meetings with US Secretary of Energy, Samuel Bodman, and European Commissioner for Energy, Andris Piebalgs, we repeatedly discussed the economic advisability of building the Trans-Caspian gas pipeline. This issue remains open because the Caspian littoral states have an agreement that any construction project under the Caspian Sea must be agreed upon by Kazakstan, Russia, Turkmenistan, Azerbaijan and Iran," he said.
"It is necessary to calculate the financial viability of the project. So far, Kazakstan is studying this project. It is seeking to learn more about it," Izmukhambetov said.
The minister said in an earlier statement that Russia could use the Trans-Caspian gas pipeline to ship gas from the Tsentralnoye and Khvalynskoye deposits at its northern Caspian offshore sector that would be developed by Russia and Kazakstan under a 50-50 agreement.
Kazakstan is planning to forward its suggestions on the gas pipeline and ways to fund the project's feasibility study to the European Commission.
The Trans-Caspian gas pipeline is expected to be integrated with the Baku-Tbilisi-Erzurum pipeline at a later date. Europe recognises the relevancy of the problem of Turkmen and Kazak gas imports. Several European countries have agreed to implement the Nabucco project, which is aimed at ensuring energy supplies from Central Asia to Austria via Turkey. The Baku-Tbilisi-Erzurum pipeline is considered a part of the project.
Central Asia currently operates a gas pipeline that transits Turkmenistan, Uzbekistan and Kazakstan and is used to ship gas to Ukraine and Russia.
Meanwhile, Baku and Azerbaijan are discussing several options to ship Kazak gas via Azerbaijan, including using the Baku-Tbilisi-Erzurum pipeline, Azerbaijani Foreign Minister, Elmar Mamedyarov, said.
"There are several options to ship this (Kazak) gas to international markets. The issue is on the agenda, but it is too early to say which of them will be chosen," the minister said after a meeting with Kazak President, Nursultan Nazarbayev, on February 27th in Astana.
It is expected that the Baku-Tbilisi-Erzurum pipeline will go into operation this year, the minister said, adding that the issue of shipments of Kazak gas via the pipeline was discussed with the Kazak president. "Kazakstan is also interested in the pipeline," Mamedyarov said. "Of course, experts should carry out detailed work, because there are a lot of related issues, including tariffs, customs duties, as well as the technical aspects in the implementation of the project," he said.

Azerbaijan ratifies contract on Govsany-Zykh field

The Azerbaijani parliament on March 6th ratified an agreement between Azeri state oil company SOCAR and Russia's RussNeft oil company on the exploration, development and sharing of production at the Govsany-Zykh group of fields, an Interfax News Agency correspondent reported from parliament. 
"SOCAR will own a 25 per cent stake in the contract, while Russneft Aberson Investment Limited will have a 75 per cent stake," Parliamentary Deputy Speaker, Valekh Aleskerov, said. The project's contractors should submit a program for exploring these fields to SOCAR, which should then approve the program in 60 days, he said. After the contract takes effect, RussNeft should pay Azerbaijan a bonus of US$ two million. "In addition, the Russian company should pay a bonus of an additional US$ two million after production increases by 1.5 times compared to 2005," Aleskerov said. RussNeft has all the financial and technological capabilities for increasing production at the Govsany-Zykh field, he said.

SOCAR hopes Kazakstan will join Baku-Ceyhan in 2007

Azeri state oil company President, Rovnag Abdullaev, reckons that Kazakstan will finally join the Baku-Tbilisi-Ceyhan (BTC) project in 2007. "I cannot say exactly when the agreement will be signed, but it will definitely be this year," Abdullaev said in an interview with the Kazak newspaper Express-K published on March 7th, Interfax News Agency reported.
He explained that after the Kazak and Azeri presidents signed an agreement on the formation of conditions to transport oil from Kazakstan to international markets through the Caspian and the Baku-Tbilisi-Ceyhan system, through the territory of Azerbaijan, in summer 2006, the next step should be the signing of a transport agreement between Azerbaijan and oil companies that will supply Kazak oil from Kashagan and Tengiz for the Baku-Tbilisi-Ceyhan pipeline.
"At the moment the sides are actively working on preparing this document. And only after it is signed will be we able to say that Kazakstan has finally joined this project," he said.
"Calculations are currently being made: who will supply how much Kazak oil for the BTC and when. This is quite painstaking work, in which many companies are involved," he said.
At the same time he said that the sides have yet to consider to question of postponing the shipping of the first oil from the Kashagan field, development of which will not begin before 2010. In parallel Azerbaijan is calculating the time of decline in production volumes at Azeri-Chirag-Gunashli and is considering various options to resolve this problem.
"At the moment SOCAR is working on projects for new investment in Azeri-Chirag-Gunashli to extend the peak of production at the fields to 2020. So, at the moment nobody is late and the postponement of the development of Kashagan will have little influence on the utilization of the Baku-Tbilisi-Ceyhan pipeline, at least until 2020," Abdullaev said.
He also said that in 2008 the BTC would be fully loaded with Azeri oil, and by 2009 oil production at the Azeri-Chirag-Gunashli field is expected to reach 65 million tonnes per year, while the design capacity of the pipeline is 50 million tonnes. "Therefore I would like to stress that for the BTC Kazak oil is additional volume, as it was built only for oil from Azeri-Chirag-Gunashli," he said. 

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FOREIGN COOPERATION

Documents signed between Baku, Chisinau 

Prime Minister of Moldova Vasile Tarlev paid an official visit to Azerbaijan on February 23rd. Moldovan ambassador to Azerbaijan, Ion Robu, said the premier was accompanied by the members of the Azerbaijan-Moldova intergovernmental economic commission composed of ministers and deputy ministers and some other officials, Interfax News Agency reported. 
The co-chair of the commission, Moldovan Trade and Economy Minister, Igor Dodon, noted that this is the first official visit of Moldovan government to Azerbaijan. He said Moldova is interested to expand relations with Azerbaijan. He noted that Azerbaijan is interested in import and export of products from Moldova and is willing for constructive dialogue with Azerbaijani government. According to the minister, Azerbaijan can cooperate with Moldova in the sphere of agriculture, industry and technology. Stressing that Moldova is an oil and gas poor country, Dodon said his country imports approximately 70 per cent of energy from foreign countries. He offered Azerbaijan the opportunity to important tractors from Moldova. Azerbaijani co-chair of the commission, first Deputy Premier, Yagub Mammadov, said that cooperation between Azerbaijan and Moldova was discussed in the business forum of Azerbaijani and Moldovan businessmen. At the end of the meeting six documents were signed between Azerbaijan and Moldova. These are intergovernmental agreements on geodesy, cartography, cadastre, geo-information and distance study of land; Migration and Protection of environment; and three cooperation agreements signed between statistics institutions, health and finance ministries of both countries. Azerbaijani and Moldovan Premier participated in the signing ceremony. It was noted that the second meeting of Azerbaijan - Moldova intergovernmental economic commission was held in the Cabinet of Ministers.

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FOREIGN ECONOMIC COOPERATION

Baku and Dushanbe to Create Economic Cooperation Commission 

Azerbaijan President, Ilham Aliyev, and Tajikistan Prime Minister, Akil Akilov, signed an agreement to expand their cooperation in the oil and gas sphere as well as in the mining industry with regards to the electricity. The meeting of the Azeri president and the Tajik premier took place during Aliyev's official visit to Tajikistan. Aliyev invited Akilov to collaborate in realizing projects such as constructing roads and bridges and the infrastructure and agriculture. It was decided to establish an Inter-Governmental Commission for Economic Co-operation and a working group to define the future positive co-operation areas, Interfax News Agency reported. 
Aliyev had a meeting with Speaker of the Upper house of the Parliament, Mahmadsaid Ubaydullayev. It comes as the first official visit of the Azerbaijani President to Tajikistan during the independence. Eleven interstate and intergovernmental agreements, covering cooperation between Tajikistan and Azerbaijan in different spheres has been in Dushanbe, during Aliyev's official visit to this country, Interfax News Agency reported. 
All documents were signed in a large meeting with the participation of the two delegations, which began immediately after the meeting between the Presidents of Tajikistan and Azerbaijan, Emomali Rahmonov and Aliyev. These are Agreements on Friendship and Cooperation, an Agreement on Non-Visa visits of the two countries, on mutual investments, on Trade and Economic Cooperation, on Cooperation in the sphere of culture and arts, in the sphere of tourism, on cooperation and mutual assistance in the custom field, on cooperation in the sphere of standardization, meteorology and accrediting. The two sides also inked an Agreement on Cooperation in the international automobile transport, in the sphere of railway transport and on air transportation.

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TELECOMMUNICATIONS

Azercell plans to boost subscriber base 7.3%

Azerbaijani cellular operator Azercell is planning to increase its subscriber base 7.3 per cent to 2.5 million in 2007, Khalim Atesh, the company's general director, said at a press conference on March 6th, Interfax News Agency reported. 
"Azercell currently controls 76 per cent of the Azerbaijani cellular market and it covers 77 per cent of the country," Atesh said. "The number of subscribers increased 40 per cent to 2.33 million in 2006. According to our forecasts, this figure should exceed 2.5 million in 2007 thanks to plans to expand the range of services and the company's price policy," he said.
"Azercell investment in developing Azerbaijan's telecommunications sector was 120 million manat in 2006 and it is planning the same amount for 2007. The company's investment reached 460 million manat in the first 10 years," he said. The appearance of new cellular operator Azerfon will help expand the cellular market in Azerbaijan, Atesh said. 
"Competition won't influence our strategy and we will do what we think is right, as we did earlier," he said. Azercell was established in 1996. Fintur Holding owns 64.3 per cent and Azerbaijan's Communications and Informational Technology Ministry has 35.7 per cent. Bakcell also provides cellular services in Azerbaijan. Azerfon, the third GSM operator in Azerbaijan, will start offering services in March.

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TRANSPORT

Azerbaijan, Daewoo ink bus import agreement

Baku-based Transgate Ltd intends to buy 1,000 Daewoo buses and this deal is the first phase, Azeri Press Agency reported on February 22. 
Azeri Transport Minister, Musa Panahov, said the move came after a presidential decree on improvement of the transportation system in Baku. "As per the US$11 million agreement, 200 buses will be sent in the first phase, of which 50 will be delivered in May," he said. South Korean ambassador to Azerbaijan, Lyu Kvang Chol, said the cooperation between the two countries not only in energy but also in transportation, construction and other fields is developing vertically.

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